Job Growth Seen Snapping Back from Winter Chill

job growth seen snapping back from winter chill
By Lucia Mutikani

WASHINGTON -- U.S. employment likely rebounded in January after being held back by cold weather the prior month, which would offer assurance that economic growth wasn't faltering.

Nonfarm payrolls are expected to have increased by 185,000 last month, according to a Reuters survey of economists, with the jobless rate seen holding at a five-year low of 6.7 percent. Economists also expect December's paltry count of 74,000 net new jobs, viewed by many as an anomaly, to be raised sharply.

"We are far from having a booming economy, but we are growing increasingly confident that the economy is developing enough internal momentum to reach take-off velocity," said Bill Hampel, chief economist at the Credit Union National Association in Washington.

A report Monday showing a surprise drop in factory activity to an eight-month low in January spooked investors and fanned fears of a rapid cooling off in growth after the economy's robust performance in the second half of 2013.

But a reading on the dominant services sector Wednesday showed a fairly strong expansion in activity in January.

The monthly jobs report, always closely watched by financial markets around the globe, %VIRTUAL-article-sponsoredlinks%will serve as a tie breaker. The Labor Department will release the data at 8:30 a.m. Eastern time.

While economists anticipate the labor market fared much better last month, relentless freezing temperatures present a wild card.

"If we get another low, disappointing number, it will change the short-term economic outlook," said Keith Hall, a senior scholar at Mercatus Center at George Mason University in Arlington, Va.

A brightening growth picture encouraged the Federal Reserve last month to move forward with a scaling back of its bond-buying stimulus. Officials at the U.S. central bank will be anxious to see payrolls snapping back from their weather-depressed December level.

While the unemployment rate is forecast holding steady, there is a risk it could decline even further in January because jobless benefits for more than one million long-term unemployed Americans expired at the end of December. If they have since given up the search for work, they wouldn't be considered as being in the labor market and unemployed.

Another Drop in the Jobless Rate

"If some long-term unemployed give up looking for work when their benefits run out, we could see another drop in the labor force participation rate," said Hall, a former commissioner of the Bureau of Labor Statistics.

"Conversely, people who lost their benefits might be forced to take a less desirable job, moving them from unemployed to underemployed."

The participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell 0.2 percentage point to 62.8 percent in December, returning to the more than 35-year low hit in October.

A further decline could depress the unemployment rate, which is already flirting with the 6.5 percent level that Fed officials have said would trigger discussions over when to raise benchmark interest rates from near zero.

But policymakers have made it clear that rates won't rise any time soon even if the unemployment threshold is breached.

"The Fed will start to stress other measures of labor market slack in their guidance on when they are going to raise interest rates," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester, Pa

The unemployment rate tumbled 0.3 percentage point in December, taking the drop in 2013 to 1.2 percentage points. Friday's report will include revisions to data on payrolls, the workweek and earnings going back to 2009.

The government said last year that the revisions to this data, which is drawn from a survey of employers, would likely show that 345,000 more jobs than previously thought were created in the 12 months through March 2013.

The report will also incorporate new population estimates. This means the employment and labor force figures that are derived from the government's survey of households won't be comparable to December.

The private sector is expected to account for all the hiring in January. Government payrolls are seen holding steady. Manufacturing employment likely rose for a sixth month, while hiring in the retail sector probably slowed after strong increases in the prior months.

While most economists think construction payrolls bounced back after being depressed by the weather in December, frigid temperatures last month may have pushed them down again.

Average hourly earnings likely rose by 0.2 percent after edging up 0.1 percent in December. The length of the workweek is seen steady at an average of 34.4 hours.

9 Numbers That'll Tell You How the Economy's Really Doing
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Job Growth Seen Snapping Back from Winter Chill
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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